Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me to solve this: An estimate of the demand function for household furniture produced the following results: F = 0.0036 Y^1.06 R^0.16 P^-0.48

Please help me to solve this:

An estimate of the demand function for household furniture produced the following results: F = 0.0036 Y^1.06 R^0.16 P^-0.48 r^2= 0.996

where

F = furniture expenditure per household

Y = disposable personal income per household

R = value of private residential construction per household

P = ratio of the furniture price index to the consumer price index

A. Determine the point price and income elasticities for household furniture.

B. What interpretation would you give to the exponent for R? Why do you suppose R was included in the equation as a variable?

C. If you were a supplier to the furniture manufacturer, would you have preferred to see the analysis performed in physical sales units rather than dollars of revenue? How would this change alter the interpretation of the price coefficient, presently estimated as -0.48?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial economics

Authors: william f. samuelson stephen g. marks

7th edition

9781118214183, 1118041585, 1118214188, 978-1118041581

More Books

Students also viewed these Economics questions

Question

LO10.2 List the conditions required for purely competitive markets.

Answered: 1 week ago